As much as $600 million in Valero's midstream assets could be put into a master limited partnership, Chief Financial Officer Mike Ciskowski told analysts in a conference call.

That could generate $125 million to $150 million annually in EBITDA (earnings before taxes, interest, depreciation and amortization), Roger Read, senior analyst at Wells Fargo Securities, said in a note to clients.

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It's also possible that Valero's 10 ethanol plants could be rolled into an MLP, Day said.

Locally based Valero has been aggressively buying rail cars to ship cheaper crude oil to its plants. It expects to own 9,000 rail cars by the end of next year. It doesn't own major pipelines, but has smaller gathering systems at some of its refineries, Day said.

A master limited partnership must pay out most of its profits to shareholders, helping it avoid most corporate income taxes and keeping its borrowing costs low.

On Wednesday, Valero will spin off its retail arm, giving its investors one share of new company CST Brands Inc. for every nine Valero shares they own. CST's stock will begin trading on the New York Stock Exchange on Thursday.

Klesse mentioned the possibility of forming a master limited partnership on Tuesday as part of the company's first-quarter earnings announcement.

The company said higher refining margins in all of its regions except the West Coast helped it swing to a profit compared to a loss for the same period a year ago. Higher per-barrel operating costs on the West Coast took a bite out of margins there.

Valero reported net income attributable to Valero stockholders of $654 million, or $1.18 a share, for the period ended March 31. For the first quarter of 2012, there was a net loss of $432 million, or 78 cents a share.

In the earlier quarter, Valero recorded a noncash loss of $605 million after taxes that was mostly related to the closing of its refinery in Aruba.

Valero attributed the higher refining margins to an increase in margins for diesel and jet fuel, and to bigger discounts on crude oil and feedstocks it purchases.

The company said its processed 2.6 million barrels of crude a day, an increase of 11,000 barrels a day compared with the first quarter of 2012.

Valero's showing beat analysts' estimates, as polled by Bloomberg News, that it would earn 99 cents a share in the quarter.

The company also beat analysts' revenue estimate of $30.4 billion, although its revenue declined about 5 percent in the quarter to $33.5 billion compared with $35.2 billion in the same period of 2012.

“Valero achieved solid results in the first quarter,” Klesse said in a statement. “Despite a heavy turnaround and maintenance workload, our refineries had good performance that was aided by wider diesel margins and crude oil discounts plus contribution from our new hydrocracker at the Port Arthur refinery.”

Hydrocrackers break down heavy crude oil into lighter products including diesel and gasoline.

Valero's stock closed Tuesday at $40.32 a share, down 88 cents, or 2.1 percent, in New York Stock Exchange trading.

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Valero's first quarter “was stronger than I expected,” said Sam Margolin, vice president at Dahlman Rose & Co. LLC in New York.

But he noted its stock is taking a hit because Valero faces “headwinds” in the current quarter. It will have to cope with less favorable discounts for heavy crude compared with light crude, higher natural gas prices and “some weakness in the global diesel market and in the U.S. gasoline market.”